UPDATED: Appeals court hears arguments against streaming act payments

TORONTO–Several streaming companies kicked off a hearing at the Federal Court of Appeal on Monday, June 9 as they attempt to overturn the requirement that they make financial contributions to various Canadian production funds. The first day of the hearing was marked by arguments from the Motion Picture Association-Canada (MPAC), Amazon.com, Inc., and Apple Inc. Court justices George Locke, David Stratas, and Monica Biringer are presiding over the multi-day hearing. The streamers are challenging a decision issued by the CRTC last June under the Online Streaming Act requiring them to contribute five per cent of their Canadian revenues to funds aimed at supporting CanCon production. While Amazon, Apple, and Spotify are fighting to have the whole decision reversed, MPAC is specifically challenging the requirement for streamers to contribute 1.5 per cent of their revenues to the Independent Local News Fund (ILNF). MPAC’s counsel did note that they are largely in agreement with the other applicants’ submissions. “This act was not focused on news,” said MPAC’s lawyer Peter Ruby during his presentation to the court. He pointed to remarks from then-Canadian Heritage Minister Pablo Rodriguez in the House of Commons in February 2022 — back when the act was being drafted — who, according to a transcript, said, “at the end of the day, it will bring more money into the system to help our Canadian creators and Canadian artists.” Ruby argued this shows that the politicians who wrote the act intended for it to help creators and artists, not support news production. “Parliament did not add such language to the streaming act, but it did enact legislation about news funding, which is the Online News Act,” he said. “So there is a regime to get more money into news, it's just not the Online Streaming Act.” Ruby echoed previous arguments made by the MPAC, stating that the streaming companies do not produce local news and should therefore not be forced to finance it. Especially because, he argues, the CRTC is supposed to implement contribution requirements that are “appropriate,” “equitable,” and consider the “nature” of each platforms’ services. The CRTC “decided not to assess each service's content individually,” alleged Ruby, maintaining that news programming is not a part of the online streamers’ business models. “In other words, the CRTC refused to follow this aspect of the recipe. It certainly didn't address the nature of each foreign online undertaking as an entertainment producing organization, not a local news producing organization. In this way, it erred in law,” he argued. The MPAC closed with the position that the CRTC did not provide enough of an explanation as to why it decided streamers should have to contribute to the ILNF. “The CRTC did an adequate job of describing the parties’ positions or concerns, then it went off the rails,” alleged Ruby, “because it didn't really provide observations informed by evidence.” Only hours into the proceeding, the CRTC issued a decision regarding the ILNF, following its nearly year-long review of the fund. Spurred by the inclusion of contributions from online streaming services, the regulator was considering revising the eligibility criteria of the news fund. In the end — besides making Corus Entertainment Inc.'s Global TV stations eligible for ILNF funding — it decided to maintain the current requirements, but it did make adjustments to the framework's incentive mechanisms and rules around reporting expenditures. Following MPAC’s presentation, Amazon’s lawyer Fahad Siddiqui took aim at the overall base contribution requirement for streamers. Amazon’s arguments revolve around the difference between an order and a regulation from the CRTC. It argues that under the Broadcasting Act, the CRTC is not allowed to impose payment requirements to a broad “class” of undertakings through issuing orders. It argues it can only do so through a regulation, which is subject to more rigorous oversight mechanisms. Amazon alleges that the CRTC exceeded its authority by side-stepping the rules and issuing an order instead of a regulation. It also failed to explain the reason for why it did so, the company claims. Additionally, part of the policy direction issued by the government states that the CRTC must make the requirements for both online and traditional undertakings equitable. Amazon argues that the CRTC did not consider equity when determining the percentage of revenues that must be contributed. The CRTC had previously acknowledged that 0.5 to four per cent of annual revenues are generally contributed to supporting CanCon in the radio sector, right before it imposed a five per cent requirement on online audio streamers, Amazon noted. The company argued that the CRTC did not clearly explain why it settled on those numbers. Central to Apple’s arguments are its position that the CRTC “put the cart before the horse” by establishing base contribution requirements before establishing a clear definition for “Canadian program.” Lawyer Julie Rosenthal argued that this was a legal error and denied Apple of any procedural fairness. If Apple knew what CanCon meant in this context, it could have been able to demonstrate how much it is already contributing to content that meets that definition, she argued. Without a clear definition, Apple and other parties could not fully make submissions about the appropriate level of contributions, whether contributions were even necessary, or how their existing activities might already support CanCon, maintained Rosenthal. This is exacerbated, according to Apple, by language in the policy direction that told the CRTC to “prioritize,” among other things, establishing a revised definition for Canadian program. Apple argues that this meant that the CRTC was required by law to do this first. Spotify was the last of the streamers to present to the court, giving its arguments on Tuesday. While the company supports the other streamers’ arguments, Spotify’s presentation focused on the amount of royalties that it pays to artists. Represented by lawyer Brandon Barnes Trickett, Spotify alleges that the base contribution requirement is “unreasonable” because the CRTC “did not properly give consideration to the effects of the royalties arrangements of online streaming services and Canadian rightsholders.” Audio streamers including Spotify, Apple, and Amazon had previously advocated for lower contribution requirements due to the royalty payments they make, arguing that they should be considered existing contributions to the broadcasting sector. According to Spotify, 70 per cent of its revenues are paid out in royalties. The company’s counsel also stated that, in 2023, Spotify paid more money to Canadian record labels alone than the aggregate music royalties paid by all traditional Canadian broadcasters “in the recording industry.” Despite the audio streamers’ arguments, the CRTC did not agree, stating in its base contributions decision that royalties are “an inherent cost of making musical content legally available to users and should not offset contribution obligations.” This is a point that the Society of Composers, Authors and Music Publishers of Canada (SOCAN) said it intends to support during its presentation, expected for Thursday. The CRTC also noted that it has “historically not taken royalty payments into account” when setting requirements for radio stations. Trickett challenged the CRTC’s finding. “There's no logic underpinning that assertion” that ‘one stream of support’ can be excluded “by the existence of the other,” he argued. “It's not rational. It's not tenable.” Trickett maintained that the “significant increase in the royalties payments” to Canadian rightsholders in recent years has been spurred by online streamers and “may very well be” helping advance the country’s broadcasting policy. “That is the consideration that is wholly lacking from the decision, so lacking that the decision wants for rationality.” Spotify also continues to argue that the base contribution requirement is a “tax,” something the CRTC does not have the power to implement. The company repeated language used by the Digital Media Association (DiMA) — the audio streamer trade group — in a lobbying campaign against the regulation, launched last fall. Spotify alleges that the CRTC did not conduct any “meaningful economic analysis” in settling on five per cent, instead it asked stakeholders to suggest what their competitors should pay. phalentm@thewirereport.ca Editor’s note: This story was updated Thursday, June 12 to include Spotify’s arguments. More to come on the appearances from other parties.

UPDATED: Appeals court hears arguments against streaming act payments

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By Phalen Tynes-MacDonald
| June 10, 2025

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UPDATED: Appeals court hears arguments against streaming act payments

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